The coronavirus job retention scheme has been extended until the end of October, but employers will have to share some of the costs from August.
The Government is now paying the wages of 7.5 million employees in an attempt to stave off millions of job losses as businesses have been forced to close down due to Covid-19.
The Chancellor, Rishi Sunak, said the furlough scheme would be extended by a further four months, with workers continuing to receive 80% of their salary.
From the start of August, the Treasury says that furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.
The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.
Sunak said: “Our coronavirus job retention scheme has protected millions of jobs and businesses across the UK during the outbreak – and I’ve been clear that I want to avoid a cliff edge and get people back to work in a measured way.
“This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects.”
The scheme will continue in its current form until the end of July and the changes to allow more flexibility will come in from the start of August, the Government said.
More specific details and information around its implementation will be made available by the end of this month.
The Government says it will explore ways through which furloughed workers who wish to do additional training or learn new skills are supported during this period.
It will also continue to work closely with the devolved administrations to ensure the scheme supports people across the UK.
The Chancellor’s decision to extend the scheme, which will continue to apply across all regions and sectors in the UK economy, comes after the Government outlined its plan for the next phase of its response to the coronavirus outbreak.
Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA), said: “Extending the job retention scheme to the end of October provides a much-needed financial lifeline to millions of employers who are having to make tough decisions to keep their businesses viable and people safe.
“By enabling businesses to bring back furloughed staff on a part-time basis, employers will have the option to implement a phased return to work as companies look to kickstart their operations in a post-pandemic environment.”
The Government has also published new statistics that show businesses have benefitted from more than £14 billion in loans and guarantees to support their cashflow during the crisis. This includes 268,000 Bounce Back Loans worth £8.3bn, 36,000 loans worth over £6bn through the Coronavirus Business Interruption Loan Scheme, and £359 million through the Coronavirus Large Business Interruption Loan Scheme.
Mike Cherry, national chairman of the Federation of Small Businesses, said: “The job retention scheme is a lifeline which has been hugely beneficial in helping small employers keep their staff in work, and it’s extension is welcome.
“Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today.”
Dame Carolyn Fairbairn, CBI director-general, added: “Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.
“Introducing much needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That’s essential as the UK economy revives step-by-step, while supporting livelihoods.
“Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with government to get this right.
“Above all, the path of the virus is unpredictable, and much change still lies ahead. The Government must continue to keep a watchful eye on those industries and employees that remain at risk.
“All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving.
“The greater the number of good businesses saved now, the easier it will be for the economy to recover.”